Capital rules for local banks still uncertain

INTERNATIONAL banking regulators are split over how much extra capital big local lenders must hold to shield taxpayers from bailing out failed banks, an official at Germany’s central bank said yesterday.

Banking watchdogs have already agreed that about 30 global systemically important banks, known as G-SIBs, must hold extra capital buffers from 2016 because they pose such a threat to the financial system should they fail.

These banks must have an extra one to 2.5 percentage points in their core capital solvency ratios on top of the globally agreed minimum of seven per cent that is being phased in from next January for all lenders across the world.

Regulators have also agreed to apply a similar approach to big national players that could threaten financial stability on a smaller scale.

But they have run into difficulties in hammering out rules for the next group down, the domestic systemically important banks, or D-SIBs, that would be consistent with the rules for their larger G-SIB peers, said Erich Loeper, who is responsible for banking supervision at the Bundesbank.

The framework for the treatment of nationally important banks is expected to be ready by November at the latest, following the publication of the criteria for identifying those banks.